© prentice hall, 2005excellence in business, revised edition chapter 6 - 1 forms of business...
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© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 1
Forms of Business Forms of Business Ownership and Ownership and
Business CombinationsBusiness Combinations
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 2
Forms of Business Forms of Business OwnershipOwnership
• Sole proprietorship
• Partnership
• Corporation
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 3
Popularity of Business Popularity of Business Ownership FormsOwnership Forms
• Sole proprietorships 73%
• Corporations 20%
• Partnerships 7%
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 4
Sole ProprietorshipSole Proprietorship
AdvantagesAdvantages
Ease of establishment
Self-satisfaction
Privacy
Tax advantages
DisadvantagesDisadvantages
Unlimited liability
Personal pressure
Difficult to get funding
Limited life
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 5
Business PartnershipsBusiness Partnerships
• General partnerships
–Share ownership
–Unlimited liability
• Limited partnerships
–Passive investors
–Limited liability
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 6
Advantages of Advantages of PartnershipsPartnerships
• Easy to establish
• Tax advantages
• Strength in numbers
• Diversity of skills
• Increased capital
• Extended life
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 7
Disadvantages of Disadvantages of PartnershipsPartnerships
• Unlimited liability
–Debts
–Law suits
• Interpersonal problems
–Managing partner
–Unproductive partners
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 8
Partnership AgreementPartnership Agreement
• Division of profits
• Decision-making authority
• Expected contributions
• Dispute resolution
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 9
CorporationsCorporations
• Enter into contracts
• Own and sell property
• Sue and be sued
• Enjoy limited liability
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 10
CorporationsCorporations
AdvantagesAdvantages
Access to capital
Limited liability
Increased liquidity
Unlimited life span
DisadvantagesDisadvantages
Excess paperwork
Burdensome costs
Double taxation
Disclosure requirements
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 11
Types of CorporationsTypes of Corporations
• Subchapter S
• Limited liability
• Subsidiary
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 12
Types of CorporationsTypes of Corporations
• Alien
• Foreign
• Domestic
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 13
Corporate GovernanceCorporate Governance
• Common shareholders
• Board of directors
• Corporate officers
• Employees of the company
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 14
Shareholder’s RightsShareholder’s Rights
• Common stock
• Preferred stock
–Voting privileges
–Dividends
–Return on investment
– Investment risk
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 15
Shareholder’s PowerShareholder’s Power
• Public
–Many stockholders
–Publicly traded
• Private
–Few stockholders
–Not publicly traded
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 16
Public Stock OwnershipPublic Stock Ownership
• Advantages
– Increased liquidity
–Enhanced visibility
– Independent market value
–Flexibility
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 17
Public Stock OwnershipPublic Stock Ownership
• Disadvantages
–Cost of going public
–SEC filing requirements
– Increased public exposure
–Loss of control
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 18
Responsibilities of Responsibilities of the Board of Directorsthe Board of Directors
• Declaring dividends
• Guiding corporate affairs
• Reviewing long-term plans
• Selecting corporate officers
• Overseeing financial performance
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 19
The Topic of Board The Topic of Board ReformReform
• Independence
• Compensation
• Duties
• Integrity
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 20
Business CombinationsBusiness Combinations
• Mergers
• Consolidations
• Acquisitions
• Leveraged buyouts
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 21
Mergers, Mergers, Consolidations, and Consolidations, and
AcquisitionsAcquisitionsAdvantagesAdvantages DisadvantagesDisadvantages
Economies of ScaleEconomies of Scale
EfficienciesEfficiencies
SynergiesSynergies
High-Risk Corporate DebtHigh-Risk Corporate Debt
Management DistractionsManagement Distractions
Culture ClashesCulture Clashes
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 22
Current Corporate Current Corporate TrendsTrends
• Shed unprofitable acquisitions
• Focus on core business
–Economic slowdown
–Political uncertainty
–Global market saturation
–Shareholders
–Wall Street
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 23
Hostile TakeoversHostile Takeovers
• Types– Tender offer– Proxy fight
• Defenses– Poison pill– Golden parachute– Shark repellent–White knight
© Prentice Hall, 2005 Excellence in Business, Revised Edition
Chapter 6 - 24
Alternative Business Alternative Business FormsForms
Strategic AllianceStrategic Alliance Joint VentureJoint Venture
•Expand Market ShareExpand Market Share
•Access TechnologyAccess Technology
•Diversity OfferingsDiversity Offerings
•Share Best PracticesShare Best Practices
•Attain Specific GoalsAttain Specific Goals
•Share StrengthsShare Strengths
•Spread CostSpread Cost
•Minimize RiskMinimize Risk
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